Sathvik Vishwanath, Bengaluru-based co-founder of Unocoin a cryptocurrency exchange that was India’s second-largest player in 2017 is no stranger to legal battles. Vishwanath along with co-founder Harish BV was personally a party to the legal challenge mounted against an RBI ban on crypto-related payments in 2018. Along with other petitioners such as the Internet and Mobile Association of India (IMAI), the two successfully persuaded the Supreme Court of India to invalidate the RBI ban for infringing on their right to practice their business.
Simultaneously Vishwanath and Harish fought and won a case in the Karnataka High Court for quashing an FIR lodged against them for opening a ‘crypto ATM’ in a mall in September 2018 while the RBI ban was in effect. The High Court quashed the FIR earlier this month after a more than two year legal battle.
An engineer and MBA by training, Vishwanath was previously in the business of designing animations for ‘Second Life’, a virtual reality game. He was paid in virtual currency for his services, which he used Paypal to convert into dollars and finally into rupees. This process took a week and nearly 7% in transaction costs, according to Vishwanath.
The steep transaction costs brought him to a meet-up organised by Sunny Ray a Canadian-Indian robotics engineer in a Hard Rock Cafe in Bengaluru in April 2013. The two subsequently teamed up along with Harish BV and Abhinand Kaseti to launch Unocoin in December 2013.
“We did our launch at an event called the Global Bitcoin Conference in the Sheraton in Bengaluru,” said Vishwanath. “We went so far as to invite agencies like the CBI and regulators like the RBI and Sebi to the event. Their representatives actually came and took notes,” he added.
The years 2014-2016 saw steady growth for Unocoin with the company raising two rounds of funding – $250,000 from a cryptocurrency player in 2014 and $1.5 million in 2016 from Blume Ventures and other venture capital players, says Vishwanath. The exchange also managed to sign up businesses in India who would accept bitcoin. “We had webspace and domain sellers, merchants giving mobile top ups, flight and bus ticket sellers and those who sold CDs and gift cards accepting bitcoin,” he added. The exchange began doing business of around ₹100 crore a year.
In 2017 the price of bitcoin exploded jumping from around $1,000 to almost $20,000 at the end of the year and Unocoin was catapulted into becoming India’s second-largest exchange after Zebpay. It also became the dominant player in south India in cities like Bengaluru, Hyderabad and Chennai. Its userbase rose from 55,000-60,000 to hit a million users and it scaled up its team 10 times over from 15 to 120 members. A series of regulatory measures ended this extraordinary boom.
RBI advisories stating that bitcoin is not legal tender were followed by Income Tax surveys and finally an RBI ban on crypto-related payments in early 2018. Unocoin stopped processing payments in rupees, restricting itself to crypto-to-crypto transactions. Volumes fell to the equivalent of just ₹10-15 lakh per day and the co-founders turned their energy towards overturning the ban in court. Even as the case dragged on, Vishwanath and Harish dialed up the pitch by setting up a ‘crypto ATM’ at a mall in Bengaluru. “We were just testing the ATM and had not done any transactions. However, following media reports of the ATM, the police came and arrested us. We spent a day in custody before getting bail,” says Vishwanath.
In March 2020, the pendulum once again swung their way with the Supreme Court quashing the RBI payments ban. Unocoin saw its volumes and users rebound along with other crypto exchanges. The price of bitcoin also rose sharply after dipping in March-April 2020 to cross its previous peak of $20,000 and reach a level of $50,000. The new wave was accompanied by growing acceptance in the west. Paypal enabled users to hold cryptocurrency in their wallets and Tesla announced a $1.5 billion investment in the virtual currency. In August 2020, Unocoin managed to raise another round of funding from Draper Associates for an undisclosed amount.
However, a government bill listed in the Budget session threatens to outlaw all ‘private cryptocurrencies’. This is far more serious than an RBI circular, Vishwanath reckons. “The case might go on for months and years. Who will have the capacity to fight it?” he asks. The crypto industry has set up a website (Indiawantsbitcoin.org) to get ordinary crypto investors to write to their MPs supporting the bill, but success looks difficult on an issue that few politicians seem to understand in depth. “Moving to another jurisdiction is an option. I expect other industry players will also consider a shift,” he adds.